Champions of the scheme, including Prince Charles, herald it as a unique project that will give local food producers the chance to compete with supermarket giants as well as providing much-needed housing.

Opponents argue the development of an upmarket food hall and a housing estate on farmland owned by the prince's Duchy of Cornwall will wreck the economy of a fragile city centre and destroy a beautiful and productive valley.

They claim the scheme on the edge of Truro is both an example of the sort of urban sprawl the prince says he abhors and of the type of out-of-town development that the prime minister's retail guru, Mary Portas, is fighting.

At the centre of a dispute that has split Cornwall's only city is the Truro Eastern District Centre (TEDC) scheme put forward by a group including the duchy, Cornwall council and the supermarket Waitrose.

If the proposals get the go-ahead productive farmland that supports a fine dairy herd, hedgerows and trees a mile from the city centre will be replaced by the Cornish Food Centre – a housing settlement with echoes of the prince's controversial model village at Poundbury in Dorset – along with a park and ride and recycling centre.

The duchy and its partners claim the park and ride will lead to a reduction in traffic heading to Truro and claim the recycling centre will be an important addition to services in the city.

But the duchy and the prince appear to be most excited about the plans for the food hall and 97 new homes. The food centre is billed as a "new concept … unique scheme that could become a useful reference point for national food retailing in the UK".

The idea is that Waitrose would share the food centre with a consortium which would buy goods from local sources and sell them under a brand called the Taste of Cornwall.

Waitrose would have three quarters of the store, the Taste of Cornwall the remainder. Shoppers would enter through a shared front door and use shared trolleys and tills.

The outcry against the scheme has been led by Truro city council, which claims the project is a "bad use of good agricultural land that will be needed for growing crops to feed the inhabitants of Truro sustainably".

It would harm the "vitality and viability" of the city centre "contrary to government policy".

The council believes shoppers would head to Waitrose, perhaps have a look at the Taste of Cornwall goods and then drive back home without bothering to go the city centre.

It is also scathing about the style of the housing. Plans for a grand centrepiece to the residential area have been scrapped because critics thought it looked too much like Buckingham Palace but still on the table is a network of "classical" terraces and mews.

"Truro has internationally renowned Georgian streets and a magnificent cathedral," the council says in its official response. "It does not need pastiche Georgian terraces and crescents placed prominently in a field."

Maurice Vella, chair of the council's planning committee, said: "It would do good for Waitrose, the duchy and their partners. But building on good agricultural land would be the sort of unsustainable sprawl deplored by the Prince of Wales."

In November the prince said "uncontrolled urban sprawl" was one of the great challenges of modern life.

Vella added that Portas's review into the high street, published last month had been needed partly because this sort of development had so damaged city centres.

"We want to keep food shops and the farmers' market in the centre, not just estate agents, clothes shops and pawn-brokers," he said.

Stroll around the farmers' market on Lemon Quay in the city centre and the views are just as robust.

Nigel Ekins, who sells smoked fish and cheese, said: "It is wrong to build on a greenfield site and this will have a disastrous impact on the farmers' market and independent shops.

"They say they want to help local producers but we're here already and doing fine. Prince Charles and the duchy are meant to be all about sustainability and helping market towns. I don't see how they can justify doing this to us."

Dave Buscombe, who brings his bread and cakes to the market, said it would be a "tragedy" for Truro while in the nearby pannier market butcher John Roach said the development could spell the end for the city centre. "Truro is already on the brink. This development would push us over the edge."

A group set up to fight the proposals, Save Truro, says it is "crunch time" for the prince – is he a "man of principle" or "two-faced, saying one thing and doing another".

Bert Biscoe, who represents Truro on Cornwall council, believes the duchy is using the city's need for a park and ride site to "crowbar in" the food hall and the housing development.

The duchy and its partners deny the park and ride is a Trojan horse, insisting it was approached by local authorities six years ago to ask if it could help make land available for park and ride, the food centre and housing.

According to the TEDC group, the scheme will create more than 200 jobs. It argues it could benefit shopkeepers and stallholders by making Truro a "food destination".

The group also points out that the residential areas will include allotments (albeit small ones) and a "demonstration garden" intended to help people become more sustainable.

It added: "The aim of the TEDC is to help people live greener lives by allowing them to shop local, grow their own food, recycle more and travel into Truro without the car."

Cornwall council's strategic planning committee could not reach a decision on whether to back the development when it met this last month. It will look again at the issue in coming weeks.